An Approach to Prosecuting Intellectual Property Crime: The Prosecutors

Edmonds Marshall McMahon’s Tamlyn Edmonds and Ashley Fairbrother were delighted to feature in the Intellectual Property Magazine, following an interview with the Deputy Editor, Tom Phillips The published interview is set out below and can be found here.

With the possibility of winning compensation and costs for brands, one enterprising law firm is finding IP enforcement success through private prosecutions, explains Tom Phillips.

If anyone won from the UK government’s long-term austerity plan, it was traders in fake goods. As money for nonessential (and low profile) departments was squeezed year after year, traditional services that had for decades prosecuted counterfeiters were reduced to only taking on the most serious cases, like those with a risk to public health. Police forces have faced drastic cuts and departments like the Chartered Trading Standards Institute (CTSI), known commonly as Trading Standards, saw its staff numbers cut by around 50% from 2010-2015.[1]

During that period, the amount of counterfeit seizures by customs within the EU remained stubbornly flat, and in 2013 constituted around 5% of all EU imports worth approximately €85bn.[2] More up-to-date data is sketchy – not least because the departments involved no longer have a complete picture – but according to those on the front line, counterfeiting is a massive, growing problem (covered in more detail in Part 1 last month). However, it’s not all rosy for the criminals. The reduction in state actions has given way to a boom in private criminal prosecutions, filling the enforcement void. A useful alternative to civil litigation (although it can run in conjunction), private prosecutions are often used to tackle economic or large-scale crime that have not been understood or prioritised by traditional law enforcement agencies. Private prosecutions are prosecutions not brought by the Crown or other statutory prosecuting authorities. The right was expressly preserved by section 6(1) Prosecution of Offences Act 1985 when the Crown Prosecution Service was established, and they can be brought by any individual, company, charity or interested party. They have been described as a “constitutional safeguard against inertia on the part of authority”. Other than the fact the prosecution is brought by a private individual or company, for all other purposes they operate in exactly the same way as a Crown prosecution. IP enforcement, specifically counterfeits, is one area to benefit, typified by the work undertaken by London law firm Edmonds Marshall McMahon (EMM).

Founded in 2012 by two senior civil service lawyers and a self-employed barrister who was standing counsel to the Attorney General, the firm focuses on prosecutions in fraud and IP, the latter being a fast-growing area. “We set up because we identified this gap in the market, that certain types of offences were no longer being prosecuted and investigated, and that government resources were being cut across the departments,” explains founding partner Tamlyn Edmonds, ex-head of the prosecution team at the Department of Health, Medicines and Healthcare products Regulatory Agency. The firm has seen a 50% increase year-on year since inception and now numbers 26 fee earners, including six partners. The last year in particular has gone “absolutely crazy”, says Edmonds. “There are more-and-more companies and even high-net worth individuals interested in the private prosecution route. Lack of state funds and cutting back on resources, not just Trading Standards but also specialised policing, the economic crime teams… “They don’t have the resources to spend on fraud investigations as they are incredibly resource intensive. They are not necessarily as high on the police priority list as other crimes, such as burglary or violent offences.”

A Partnership

The firm’s counterfeit work arrives from TM Eye, a private investigations company that acts on behalf of brands. TM Eye runs undercover operations, performing test purchases and carrying out surveillance, often at market stalls like Cheetham Hill (known as ‘counterfeit street’) in Manchester. It then hands the casefile to EMM who brings the prosecution, as solicitor Ashley Fairbrother explains. “We receive a file of evidence of covert recordings, witness statements and exhibits, which is distributed to one of our lawyers. We consider whether the case is in the public interest and whether there’s sufficient evidence to provide a realistic prospect of conviction– the same test that the government would apply in carrying out any government prosecution.” TM Eye and EMM always ensure this test is met, so it’s usually time to begin proceedings, kicked off by laying the information at a Magistrates Court, which issues a summons. EMM serves this summons on the defendant, requiring them to attend court. “We usually ask for a first hearing date within three to six weeks, which is when the defendant is required to attend. This gives sufficient time to prepare the evidence bundle in a format that can be served in legal proceedings. The defendant then attends a court of first hearing. In about 98% of IP cases the defendant will plead guilty, either at the first hearing, or at one of the preliminary hearings. Those that don’t plead guilty and want to go to trial, can be tried within six months on a smaller case with the biggest cases, involving multi-million pound counterfeit schemes, taking up to two years.”

Proceeds of crime

One of the biggest benefits of bringing a private prosecution is that the private prosecutor can recoup the costs of prosecution from state funds. They can also use the confiscation regime under the Proceeds of Crime Act, if the defendant is convicted. “Serving a custodial sentence is not as concerning as losing a house or car, etc…” says Edmonds. “That’s the whole basis of the regime – to deprive a convicted defendant who has benefited financially from their offence from the proceeds of their crime.” Trademark offences are classified as ‘lifestyle’ offences, which means that if the case proceeds to confiscation the court can look at everything the defendant has spent and acquired in the six years prior to the commencement of proceedings. If the defendant cannot prove they’ve acquired those assets legitimately, they are lumped into the total, unless there is a serious risk of injustice. A private prosecutor can also apply for a criminal freezing order, preventing a defendant from ‘dissipating’ their assets. “In these particular category of offences, it can be assumed that if they’re carrying out these offences they’re going to have a criminal lifestyle. And that’s why we have the very draconian powers that the Proceeds of Crime Act gives you,” says Fairbrother, who notes how, for brand protection officers, this is music to their ears. “When we went to the [International Trademark Association annual conference] this year, a lot of the brand protection officers were saying to us that you need to hit these people in their pockets, they’re not going to be bothered about going to prison for six months or a year.” Even better, there is the possibility for the brands to be compensated for their loss. While the proceeds of a confiscation order will go to the state, a compensation order, often worth tens of thousands of pounds, can be paid towards the brand for the loss it has suffered.

The silent brands

With all this on the table, one would assume brands would be extolling the benefits of this enforcement, but none were willing to speak for this article. TM Eye allows the brands to remain hidden by acting as the named plaintiff. A convenient arrangement, but why the shyness? Edmonds explains, “One of the concerns that can sometimes be raised by brands is reputational risk. They don’t want to be seen as the ‘big bad brand’ prosecuting people. This is why TM Eye’s service is so unique. All the prosecutions are brought in the name of TM Eye, so there is no brand name in lights.” Brands also don’t want to advertise that they have a problem with counterfeiting, which, as the investigators who trawl the markets know, can be a huge problem for some, particularly luxury accessories like handbags.

Design rights

Thanks to a recent change in the law, design rights is a new area for the firm and its investigations partner is design rights. The Intellectual Property Act, which came into force in 2014, criminalised design right infringement and came decades after its cousins in copyright and trademarks infringement. Designers are slowly waking up to the prosecutions route now available, and in 2016 EMM prosecuted what it believes was the first ever design rights case. Adds Fairbrother, “It’s only a matter of time before designers start realising they’ve got this additional route to protect their designs and it becomes a new string to their bow.” With the financial squeeze still on, EMM sees no let-up in the number of cases. It benefits from a close working relationship with the authorities, whom seem thankful for the assistance. Fairbrother points to the consultation paper to the Digital Economy Act, which came into force for copyright infringement on 1 October. In that consultation, the former Minister for IP Baroness Neville-Rolfe, recognised the use of private prosecutions as a way of deterring offenders. EMM is helped by TM Eye’s close relationship with the authorities. It is “probably one of the only” private companies in the country to be able to make requests to check the police national computer. It also has an information sharing agreement with the police to share information on witnesses or defendants. Fairbrother concludes, “[Private prosecutions] have also been encouraged by government and authorities. A recent case that came to the Supreme Court earlier this year (R v M; R v C; R v T), encouraged the use of prosecutions and the public policy objectives that they achieve.”

Footnotes

[1]The Impact of Local Authority Trading Standards In Challenging Times’, John Raine, Catherine Mangan and Peter Watt. University of Birmingham Institute of Local Government Studies, March 2015.

[2]2017 Situation Report on Counterfeiting and Piracy in the European Union. Europol and European Union Intellectual Property Office.